Building Wealth Scientists at PepsiCo have spent 70 years and billions of dollars chasing the right combination of lemon and lime.
And they still haven't figured it out.
Let's go back nearly 100 years so you can understand Pepsi's struggles...
In 1929, one company out of St. Louis first created the soft drink 7UP. At the time, and throughout the next two decades, this soda was laced with lithium as a calming agent.
As you can imagine, folks were hooked. 7UP stormed the beverage market and was a dominant soda for decades.
Then, in the 1970s, Sprite began to steal 7UP's market share. Its brand benefited from generous marketing spending and associations with hip-hop stars and other edgy artists. In 1986, rapper Kurtis Blow recorded an ad touting Sprite's taste... "Great lymon taste, it's tough," Blow rapped. "Without lymon, it's not happening. So sorry, 7UP."
Pepsi wanted a piece of this market to complement its classic cola.
In the 1950s, it launched its own lemon-lime soda called Teem. If you have never heard of Teem, you're not alone... It flopped. Then Pepsi tried again with its lemon-lime drink Storm, which never even made it to market.
In 1984, Pepsi found some success with Slice. It boasted a whole 10% real fruit juice, and that swayed some folks to drink it. By 1987, Slice commanded a 3.2% share of the American soda market... But it fell below 2% shortly afterward.
After Pepsi pulled the plug on Slice, as Sprite was still the dominant lemon-lime soda, it launched Sierra Mist in 1999. The soda died a quiet death last year.
Today, Pepsi executives are hyping its new lemon-lime soda, Starry. Starry has been described as a bit softer and sweeter than Sprite, much like the palate distinction between Coke and Pepsi.
Pepsi executives are excited about Starry... And as a result, they are throwing their full weight behind the drink in hopes of finally dethroning Sprite.
Pepsi has already made the decision to replace its Mountain Dew soda with Starry as the official soda of the NBA – after the company won that honor in 2015. Pepsi even hired actress Keke Palmer and NBA guard Tyrese Maxey for Starry's debut ad campaign.
After seven decades of failure for Pepsi in the lemon-lime-soda market, management needs Starry to be a hit... Researcher Euromonitor says 10% of all carbonated soft drinks sold in the U.S. are lemon-lime.
It's a big market. And Sprite still dominates it...
Our guess is that Starry will face the same fate as Teem, Slice, and Sierra Mist... Starry might become a successful drink in its own right, but even if it does have the perfect combination of lemon and lime, we can't see it shaking Sprite's stranglehold on the market.
Here's the thing... Sprite has incredible brand loyalty. Folks who've been drinking Sprite for 20 years are not going to suddenly stop because Starry tastes a tad better. People aren't wired like that.
Even though Sprite tastes roughly the same as it did 10 or 20 years ago, it has been able to fend off competition and innovation because of one thing... its brand.
Of course, Sprite is owned by beverage giant Coca-Cola (KO). In 2021, Coca-Cola had five sodas that cracked the bestselling soft drink in the world list... Coke at No. 1, Diet Coke at No. 3, Sprite at No. 6, Coke Zero at No. 8, and Fanta at No. 9.
Coca-Cola is a brand everyone knows, and it dominates the market. Based on volume, Coca-Cola has a 45% market share of the soft-drink market. Pepsi comes in second at 26%.
Coca-Cola is able to maintain its market share in a highly competitive market because of its brand. Forbes ranks Coca-Cola as the sixth most valuable brand in the world.
In today's market, most folks want to look for the next big thing. They want to buy companies with new technologies that will change the world. If you hit on one of these companies, you'll get rich. Of course, you could also lose all your money playing this game.
We don't think the best investors have to constantly swing for the fences. They would be much better off in companies with time-tested brands, stocks that compound your wealth... Stocks like KO.
Don't overthink investing. Sometimes it's as simple as owning the company that makes your favorite drink.
KO is as close to a "perfect stock" as you will find.
And if you need to find more "perfect stocks," then tune in tonight as Joel Litman and Marc Chaikin team up with a system to help you find them. These are stocks that will help you navigate the uncertainty ahead and keep you growing your wealth.
They're revealing all of the details at 8 p.m. Eastern time tonight. Click here to make sure you don't miss it.
What We're Reading...
- Something different: Wells Fargo CEO warns of severance costs of nearly $1 billion in fourth quarter as layoffs loom.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
December 6, 2023